Doha: The Qatar Financial Markets Authority (QFMA) has approved the merger of Masraf Al Rayan QPSC and Al Khalij Commercial Bank (al Khaliji) PQSC. The merger of the two banks would create one of the Middle East’s largest Shariah-compliant groups.
“In connection with the merger agreement announced on January 7 2021, between Masraf Al Rayan QPSC and Al Khalij Commercial Bank (al Khaliji) PQSC, a merger application was filed with the QFMA. We are pleased to inform that the QFMA has approved the merger application, subject to applicable laws and regulations,” said Al Khaliji in a filing to the Qatar Stock Exchange, yesterday.
Masraf Al Rayan had announced its potential merger with Al Khaliji Bank on June 30, 2020. Early this year on January 7, the banks announced the merger agreement. Following the Merger, Al Khaliji’s business will be absorbed into Al Rayan’s business, and Al Rayan will be the remaining legal entity, which will continue to operate in accordance with Islamic Shari’ah principles.
The merger will lead to the formation of a larger and stronger bank with a strong financial position and high liquidity with a variety of banking activities, customer portfolios, distinctive products, and a stronger base for financing development initiatives in line with Qatar National Vision 2030.
The merger is also expected to contribute positively to the economic development in Qatar by supporting corporate businesses and small and medium sized entities, and will also create a strategic partner for the public sector. Additionally, the merger will combine the key strengths of the two banks in the areas of retail and private banking services, corporate and government institutions, capital markets, and wealth and asset management, giving the combined business both an excellent proposition for customers and stability through diversification for shareholders.
Moody’s Investors Service (Moody’s), in a report released in April this year, had said that the merger will position Masraf as Qatar’s second-largest bank and the largest Islamic bank in Qatar.
“In addition to benefits related to scale, Masraf’s profitability will benefit from the cost and revenue synergies and stronger liquidity profile of Al Khaliji. The combined entity’s asset quality is expected to remain strong. The combined non-performing financing to gross financing ratio (NPF ratio analogous to NPL ratio for nonIslamic banks) will be around 1 percent, a similar level to Masraf’s standalone,” it said.
The rating agency expects the provisioning charges to stabilize at current levels which should support profitability. The bank’s liquidity profile will improve as a result of the merger given the stronger liquidity buffers of Al Khaliji. The combined entity pro-forma liquid banking assets to tangible banking assets as of December 2020 was around 30 percent, compared to 26 percent for Masraf standalone.
